Pandora shares fell following its announcement to investors it would spend more aggressively on marketing in defending its lead in the market in online radio. The move will put a dent in the company’s profit.
For the second straight quarter, Pandora has forecast it would break even or possibly earn as much as 3 cents a share, the company, based in Oakland announced last week. The forecast was less than analysts who have forecasted a profit of 5 cents a share.
Pandora has had to spend more to keep and attract more listeners. Marketing costs during the first quarter increased by 63% to over $61.9 million said the company, which was in line with its increased revenue. Costs of content were up by 26% to over $108.2 million.
CFO Michael Herring said the investment curve has become higher than what Wall Street had suspected, as it is a great deal of work to provide the best online music service.
Pandora shares dropped by 11% this week, prior to recovering to close on Friday at $28.20 and this year are up by 6%.
The music service is set to benefit from increased advertising on its desktop and mobile products, with users listening more often and longer, according to an industry analysts, who has a recommend on purchasing the stock.
The first quarter net loss was $28.9 million or equal to 14 cents a share, compared to $38.7 million or 22 cents a share during the same time one year ago.
Pandora said sales had advanced by 69% to end the quarter at $194.2 million, with revenue at $180 million, an increase of 54%. Analysts predicted revenue would be $175 million.
Pandora makes its money through ad sales as well as ad-free subscriptions. Prices for its paid service are to increase starting in May to $4.99 per month for any new users, said Pandora in March.
Data on Pandora’s audience showed that listener hours had increased by 12% to over 4.8 billion during the first three months of the year compared to last year during the same quarter. Active overall listeners were up by 8% to more than 75.3 million.